The Economics of Big U.S. LNG Export Facilities
We spotted a fascinating article on the Forbes magazine website about Freeport LNG, which is fed (in part) by Marcellus/Utica molecules traveling through the Williams Transco Gulf Connector pipeline (see Williams Gulf Connector Goes Online – M-U Gas to Corpus Christi?). The article is about Freeport’s founder/builder/CEO, Michael S. Smith. However, it is some of the ancillary information woven into the article revealing the economics of the facility that caught our attention. How much money does it cost to build these plants? How much money do they make? And how long does it take to begin turning a profit?
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What a major disappointment the Joe Biden administration has been for the country as a whole, and the oil and gas industry in particular. The Biden administration is packed with far-left socialists. The Dept. of Energy is the latest repository. A few days ago DOE announced another round of appointments to important positions within the agency. Most of them have zero experience in the energy industry. Most of them are political operatives (i.e. hacks) who ran the Biden campaign in various states during last year’s election. It’s political patronage–nothing new about that (happens on both sides of the aisle). The problem is the great damage this bunch will do to oil and gas during their hopefully brief tenure.
The Enverus U.S. rig count broke another one-year record. For the week ending June 16, the rig count stood at 567–the highest number it has seen since April 2020, just as the pandemic was starting to really take hold and shut everything down. The Marcellus play stayed even, while the Utica regained a rig it lost the week before. Collectively the M-U is currently running 46 rigs.
MARCELLUS/UTICA REGION: ConEd looking to power New York City’s future with renewables; OTHER U.S. REGIONS: While claiming ‘environmental justice,’ pipeline protesters vandalize native-owned businesses; NATIONAL: U.S. dry natural gas production and rig count continue to grow from pandemic lows; Shale operators’ strict financial discipline is finally paying off; N. American oil service firms’ pricing and hiring on the upswing; It’s too late to avoid a major oil supply crisis; Satellites seek out methane leaks from pipelines, oil fields, landfills and farms.
Last night the Pennsylvania Dept. of Environmental Protection (DEP) held a virtual hearing on a compromise plan between Energy Transfer/Sunoco Logistics and the DEP to allow ET/Sunoco to complete construction of the Mariner East 2 pipeline project in the Marsh Creek State Park area (Chester County) where there have been some “issues” that halted work in the area. Given the buildup by the anti-fossil fuel left to turn out and mouth off at the hearing, we’re struck that (so far) it is radio silence in mainstream media about the hearing. We can’t find a single story about the hearing. We do, however, have a report on more than two dozen pro-pipeline speakers who turned out for the virtual hearing. Perhaps that’s why the media is silent?
Sabal Trail is a $3.2 billion, 515-mile interstate natural gas pipeline in Florida, Georgia, and Alabama built to deliver (in part) Marcellus gas to the southeast. Sabal Trail connects to Williams’ Hillabee Expansion Project, which is a pipeline spur built off the huge Transco pipeline system. On June 15 the Federal Energy Regulatory Commission (FERC) issued orders extending the time for both projects to complete the final bits of their construction by another two years.
On January 4, 2014, Rice Energy (at that time run by Dan Rice IV) hired Vice President for Completions (head fracker) Babatunde Ajayi. After Ajayi assembled a team and a system that propelled Rice to become one of the leading Marcellus/Utica drillers, Rice fired Ajayi on October 31, 2016. Rice claimed Ajayi was double-dipping–that he had a conflict of interest by owning shares in a company doing business with Rice Energy. Ajayi says he had reported his ownership interest–for years–and that Rice fired him shortly after he was forced to sell all of his shares in the other company. The reason he was fired, according to Ajayi, is so that Rice wouldn’t have to pay him $1.9 million in bonuses via shares of Rice stock. According to Ajayi, Rice used him, used his knowledge, then kicked him to the curb. So he sued.
Evolution Well Services, headquartered in Houston with a regional office in Pittsburgh, specializes in “electric” fracking–using natural gas from the well pad (instead of diesel fuel) to power turbines to create electricity that drives fracking pumps. The company reports hitting a major milestone: Completing over 30,000 frac stages, the most electric frac stages completed to date in the industry. The stages were completed for numerous clients across the Marcellus/Utica, Permian, Scoop, Stack, and Eagle Ford shale basins.
S&P Global Market Intelligence has been publishing a multipart series exploring the natural gas industry’s role and prospects in the so-called energy transition happening across the world. A mania has taken hold forcing all companies to cut so-called greenhouse gas emissions–including companies in the energy industry. (Don’t forget what they produce are hydrocarbons, so they have to cut their own use of very thing they produce.) What is the role of natural gas in a “low carbon” world? How can upstream (drilling) companies adapt and stay in business? S&P says natural gas’ “low carbon challenge” is to stay cheap and get “cleaner.” What do they mean?
On Joe Biden’s first day occupying the White House, he signed an Executive Order (EO) suspending new oil and gas leasing on all federal while the Interior Department reviews existing leases and permitting practices for 60 days (see 
Adelphia Gateway, a plan to convert an old oil pipeline stretching from Northampton County, PA through Bucks, Montgomery, and Chester counties, terminating in Delaware County at Marcus Hook, recently received permission from the Federal Energy Regulatory Commission (FERC) to begin final the final bits of construction (see 
A federal court in Pennsylvania upheld the findings of a U.S. Dept. of Labor investigation that oil and gas contract worker Henkels & McCoy Inc. owes big money in back wages and overtime to 362 workers at 11 worksites in five states, including Pennsylvania, West Virginia, Connecticut, Georgia, and (yes) even in New York too. The company must now pay $1,085,830 in back wages and damages.
Range Resources has joined the bandwagon of Marcellus/Utica drillers paying homage to ESG (environmental, social, governance) concerns by pimple-faced Millennial investors who demand all companies, even oil and gas companies, bow down to the global warming gods. Range announced its board of directors has formed an ESG and Safety Committee, and that the company has enrolled in the same program several other M-U drillers have joined called Project Canary.
Technically this post is not about the Marcellus/Utica, but it’s such great news we just have to share it. On Monday, Texas Gov. Greg Abbott signed a new bill into law that bans state investments in banks, investors, and other companies that have cut ties with the oil and gas industry. Texas is divesting from the diverstors. Love it! It’s about time we fight back and fight back hard against the left.